Sustainability now the key driver for plastics industry profits

‘What is this block of waste plastic doing on an Arctic ice-floe’, thousand of miles from where it was manufactured?  Even more worrying is the question, ‘what will happen to it next?’  As David Attenborough’s ‘Blue Planet II‘ programmes have shown, plastic can break down into micro-particles after it has been used.  And these micro-particles can then enter the food chain and the water supply:

  • Around 150 million tonnes of plastic “disappear” from the world’s waste stream each year according to the BBC
  • The United Nations estimates each square mile of sea contains 46000 pieces of waste plastic
  • In turn, this plastic breaks up into micro-plastics, which can be eaten by fish and birds, and absorbed by plankton
  • And then, as well as harming wildlife, it may well enter the food chain
  • Micro-plastics also enter the water supply, and have even been found in drinking water at Trump Tower in the US

Now governments are starting to take action, with last week’s UN meeting of environment ministers formally agreeing that “the flow of plastics into the ocean must be stopped”.  As the official Conference statement noted:

“We have been so bad at looking after our planet that we have very little room to make more mistakes…. we are sending a powerful message that we will listen to the science, change the way we consume and produce, and tackle pollution in all its forms across the globe.”

As I noted back in July at the launch of a major Study on waste plastic:

“Nobody is claiming that this waste was created deliberately. Nobody is claiming that plastics aren’t incredibly useful – they are, and they have saved millions of lives via their use in food packaging and other critical applications. The problem is simply, ‘What happens next?’ As one of the Study authors warns:

““We weren’t aware of the implications for plastic ending up in our environment until it was already there. Now we have a situation where we have to come from behind to catch up.””

We also know how this story will end, because we have seen it played out many times over the past 75 years.

As the photo on the left shows from 1953, most major Western cities used to be covered in smog during the winter, with people routinely wearing masks to try and protect themselves.  The same is still true today in China and many cities in the Emerging Markets, as the photo on the right confirms.

  • The smog problem was caused by coal, and governments were forced by popular pressure to greatly reduce its use in the West.  Too many people were dying, or developing major lung and other diseases
  • Then there were similar environmental problems with lead in gasoline, and with pollution from cigarette smoke.  Again, governments moved to ban the use of lead, and to ban or restrict smoking in public places

The simple fact is that as societies become richer, people become more demanding about the quality of their lives.  It is no longer enough to tell them that they are lucky to be alive, and to have some food to eat and water to drink.  We can see the same development in China today, where President Xi knows that he has to tackle pollution, if the Communist Party wants to stay in power.  As I noted last week:

Joint inspection teams from the Ministry of Environmental Protection, the party’s anti-graft watchdog and its personnel arm have already punished 18,000 polluting companies with fines of $132m, and disciplined 12,000 officials.

October’s 5-yearly National People’s Congress stepped up the enforcement measures:

“For those areas that have suffered ecological damage, their leaders and cadres will be held responsible for life,” said Yang Weimin, the deputy director of the Communist Party’s Office of the Central Leading Group on Financial and Economic Affairs. “Our people will be able to see stars at night and hear birds chirp.”

Smart companies and investors in the plastics industry already know “business as usual” strategies are no longer viable.  Instead, they are starting to map out the enormous opportunities that these changes will create.

The issue is simply that plastic waste is no longer just seen as being unsightly.  It is now recognised as a major environmental hazard. As the 3rd chart shows, 480bn plastic bottles were sold in 2016 around the world, but only 7% were recycled.  This waste is becoming unacceptable to public opinion. As a result, the UK government is now considering a tax or ban on all single use items.

Equally important is that the momentum for change has been building for a decade, as one can see from a look back over some of my posts on plastic bags:

Globalisation was the great trend of the past 30 years, and it changed the world very profoundly.  Today, the focus is on sustainability and the development of the circular economy.

It is an exciting time for people who want to solve the problem of plastics pollution by thinking “out of the box”, and developing the more service-driven businesses of the future.

 

The post Sustainability now the key driver for plastics industry profits appeared first on Chemicals & The Economy.

Supply chains to shift from global to local

YouTube Jun17

We are living in an ever more uncertain world, where “business as usual” is becoming the least likely option for the future. Companies and investors need to adapt quickly to this new normal environment, if they want to maintain revenue and profit growth. One example comes from the American company 3M, which has become legendary for its ability to identify new trends. Their latest insight continues this tradition, as CEO Inge Thulin has explained:

Our strategy has changed. If you go back several years, there was a strategy of producing at huge facilities at certain places around the world, and shipping it to other countries. But now we have a strategy of localisation and regionalisation.”

As Thulin suggests, there is plenty of evidence that global supply chains have reached their sell-by date. Political pressures are just one example of the challenges they now face, with America’s President Trump leading the way in starting to redraw the global trade map:

  He has already withdrawn from the Trans-Pacific Partnership, aimed at linking the US and 11 Pacific nations
  He is also intending to renegotiate the North American Free Trade Agreement with Mexico and Canada
  This month, he announced his intention to withdraw from COP-21, the Paris Climate Change Agreement

Similar disruption to previous trade patterns is also underway in Europe, where the UK’s Brexit vote to leave the European Union (EU) means that at least 759 treaties will have to be renegotiated – covering not only trade, but also key areas for business such as air traffic rights and financial services. This process will not be easy in the UK’s febrile political atmosphere, given the Conservative Party’s failure to win an outright majority in this month’s election.

The move away from globalisation towards more local supply chains also highlights the growing importance of sustainability as a key driver for the future. Globalisation was a critically important dynamic during the Baby Boomer–led economic SuperCycle, when demand was rising on a constant basis. But this demographic dividend is now being replaced by a demographic and demand deficit.

Today’s globally ageing population means that economic growth is set to decline in many countries:

  Older people already own most of what they need, and their incomes decline as they move into retirement
  The younger generation are also owning less “stuff”, as streaming services such as Netflix and Spotify confirm

Digitalisation is playing a key role in enabling this aspect of the paradigm shift, and it seems likely that major markets such as autos will now be prime candidate for disruption. We cannot yet know whether car-sharing, or autonomous vehicles, or another yet-to-be-invented business model will eventually dominate the mobility market of the future. But we can be reasonably sure that major disruption lies ahead.

I discuss these issues in more detail in the above video interview with Will Beacham, deputy editor of ICIS Chemical Business, and in a new article for the magazine.  Please click here to download a free copy.